XIV. Workers' Compensation - Account 925
In Ex. 1292 for SoCalGas (and Ex. 34 for SDG&E), the applicants forecast the test year expenses for worker' compensation costs that are necessary to treat and compensate employees injured while on the job. This is an integrated service for both utilities and the corporate center. The companies forecast the expected changes in costs, which included increases in compensation rates, medical costs increasing by 20% and an analysis of other "cost drivers."
TURN argued that SoCalGas' allowance for workers' compensation expense should be adjusted proportionally to reflect the difference between the applicant's requested payroll (labor expense) and ORA's forecast (or, presumably the level adopted in this decision). This would reduce the 2004 Test Year estimate of $23.362 million by $3.387 million (14.5%) to $19.974 million.93 TURN argued that ORA should have included an adjustment as a result of its own proposed payroll adjustment. ORA made no recommendation.
SoCalGas argued that it was "self insured"94 and so there are no payroll-based premiums. For 2004, SoCalGas proposed $23.362 million that included an increase of $8.680 million (59%) from the 2001 Base Year cost of $14.682 million. SoCalGas described its obligation to pay for medical treatment, legal expenses, and indemnity payments that include temporary or permanent disability payments, and vocational and rehabilitation payments. In addition, it must maintain a reserve account "to insure that Company (sic) has adequate funds to pay the required benefits for each claim." (Ex. 12, p. 43.) As claims are made, SoCalGas must set aside funds in the reserve account. Near-identical testimony was presented for SDG&E, where the Test Year 2004 estimate of $9.279 million included a $2.594 million (39%) increase over base Year 2001 costs of
$6.685 million.95 Because of the similar testimony we may apply the same analysis and ratemaking outcome to SDG&E. What is not clear from the testimony is whether this is a fully segregated account separate from other corporate funds or only an accounting provision.
We take note of the public debate and recent legislative action that may in the near future affect workers' compensation costs for SoCalGas and SDG&E. We have no record now on which we could make any forecast adjustments and we will not fall into the trap of going beyond the record. We cannot even comment on how or whether recent changes would affect a self-insured employer. But TURN has at least demonstrated that the costs for workers' compensation are difficult and complex to forecast for ratesetting purposes, especially when we have a contentious labor expense - number of employees - dispute throughout both applications. It is clear even on our record that the obligations for workers' compensation are complex, detailed, and largely regulated beyond our jurisdiction. We must strike a fair balance between the ratepayers and the shareholders, so that workers are adequately protected.
We will include for ratesetting purposes the Test Year 2004 estimates of $23.362 million and $9.279 million for SoCalGas and SDG&E, respectively. We require, however, that both companies establish a memorandum account and track the differences between actual expenditures and the changes to their reserve accounts required to account for pending claims. In the next rate proceeding, SoCalGas and SDG&E are directed to reconcile their actual expenses and reserve account changes (including the subsequent attrition years), using this memorandum account and offset any excess against the next test year revenue requirement. The only reasonableness review issue should be the adequacy of the reserve so that SoCalGas and SDG&E do not unnecessarily fund the reserve accounts beyond their identified obligations. This is not a promise that if actual expenses and reserve requirements exceed the test year estimates, the shortfall would be recoverable; we set as a ratemaking cap the full requests by SoCalGas and SDG&E that already assume all positions budgeted in the applications.
92 Ex. 12., pp. 42-52 for SoCalGas.
93 TURN opening litigation brief, p. 130, citing the Ex. 501 calculation that relied on an ORA adjustment of $56 million to payroll.
94 Ex. 136, GJR-2.
95 Ex. 12, pp. 42 - 52, and Ex. 34, pp. GRJ-41 - GRJ-51. The quoted text is Ex. 12, p. 42.
